Executive compensation is a frequent topic in the media today. From an auditor's
perspective, executive compensation is an important consideration when it is time to develop
the audit plan and audit strategy. If earnings and revenue are tied to compensation, then there
is a risk of manipulation. Amazon’s CEO, Andrew Jassy’s total compensation for 2021 was
$212,701,169. a Most of this compensation was driven by stocks. The median employee is paid
$32,855. a Andrew Jassy pay ratio was 6,474:1 – the highest pay ratio! (Highest-paid CEOS: AFL-
CIO).
I believe that an executive compensation is a way to motivate other members of the
company to grow and to some extent, the CEO can be a role model for many. I believe that
most CEOs are worth the compensation they make due to the simple fact that they have
brought the respective company to reach milestones. Ultimately, they are the true decision
makers for the company’s success or failure.
There are various audit procedures to reduce the risks of material misstatements to
prevent fraud and abuse. According to PCAO auditing standard 12, there are procedures to
address the risk of material misstatements. The auditors should review these procedures and
the minutes. Auditors should ensure that the authorization policies are properly followed since
the CEOs have the capability to override all decisions. In addition, there should be some other
compensation policies that auditors can utilize as well in order to make sure that the executives
are being compliant.
References
Highest-paid CEOS: AFL-CIO. AFL. (n.d.). Retrieved September 30, 2022, from
https://aflcio.org/paywatch/highest-paid-ceos
